Comex gold futures retreated on Friday, giving up much of the previous session’s surge as investors re-assesed outlook for a reduction in Federal Reserve bond purchases.
Gold had surged by nearly five per cent during the previous session.
Short-covering began on the back of the Fed’s decision to close out bets on lower prices late Wednesday to leave its $85-billion-a-month bond-buying programme unchanged.
Sentiment was affected after a Federal Reserve official said the central bank could begin to roll back bond purchases if data points to a stronger economy, as soon as the next month.
The gold market had rallied substantially on tapering being taken off the table.
Recent comments of tapering have injected some uncertainty near term, and that has prompted a wave of selling in the gold and the precious metals complex once again.
Comex gold futures moved as expected. As mentioned in the previous update, prices declined towards $1,290 levels and bounced higher from there. But, prices structures have lost the bullish tendencies that it has been displaying. While $1,365-75 caps upside attempts we expect prices to gradually grind lower to $1,270 which could be the trigger for a fall towards $1,200 or even lower now.
Unexpected rise above $1,376 could warn about the failure of this bearish expectation as such a rise could turn the picture mildly bullish for $1,405. Favoured view is for a decline to lower levels and a break of $1,270 now.
The wave counts need to be reviewed once again. A failed fifth wave move at $1,800 resulted in a corrective decline to $1,181 in the form of wave “A”.
A possible wave “B” is in progress with targets near $1,420 or even higher to $1,485. This means a wave “C” is expected to follow through which could target $1,150 or even lower.
Alternatively, from the peak of $1,920 a corrective decline in the form of “A-B-C” is already over at $1,181 and a new impulse has begun. Confirmation of such an impulse will be seen at $1,535. RSI is in the neutral zone now indicating that it is neither oversold nor overbought. The averages in MACD have gone below the zero line of the indicator hinting at a bearish reversal.
Therefore, look for gold futures to test the supports levels.
Supports are at $1,305, $1,270 & $1,210 and resistances are at $1,355, $1,375 & $1,405.
(The author is the Director of Commtrendz Research and also in the advisory panel of Multi Commodity Exchange of India Ltd (MCX). The views expressed in this column are his own and not that of MCX. This analysis is based on the historical price movements and there is risk of loss in trading. He can be reached at gnanasekar.t@gmail.com.)